Steven Fisher: That’s really helpful. And just to follow-up, sort of the macro level of the pace of economic growth seems to be diverging between Europe and North America increasingly. So can you just give us a sense of what you’ve factored in on the European economy and how you’re thinking about that? I know you talked about the construction side, and I guess similarly on China, how are you thinking about China in 2024 sort of a net positive for you, I think in 2023, maybe different for some other companies. So how are you thinking about that in 2024?
Christopher O’Herlihy: Yes. I think in our overall guidance here of 1% to 3% organic, that’s where you’ll find all the major geographies. So North America, in that low single-digit, 1% to 3% range. And Europe kind of similar to North America, definitely we’ve seen some challenges on the construction side as you pointed out, but kind of you put it all together, it’s in that one to three range. And then the China is more positive, but that’s really driven by the automotive business, which is more than half of our revenues in China. So we expect another double-digit type growth for the auto business in China. And that takes China to kind of the mid single-digit range in 2024.
Steven Fisher: Really helpful. Thank you so much.
Christopher O’Herlihy: Sure.
Operator: Your next question comes from the line of Julian Mitchell with Barclays. Your line is open.
Julian Mitchell: Thanks very much and good morning.
Christopher O’Herlihy: Good morning.
Julian Mitchell: Maybe – and apologies if I’m somewhat retreading some worn ground already, but just trying to understand on the revenue outlook again, because it sounds like you had suffered from some destocking in 2023. You’re assuming that destocking continues Q1 and Q2 or you’re seeing that destocking continue as we speak. But you sound confident on the sort of sell-through, I suppose and so the guidance embeds your selling recouples upwards to sell through in the second half. So I just wanted to make sure, is that the right way of thinking about it? And when you’re thinking about sell-through right now, is your sense from your salespeople and the bottom up work that you mentioned that the sell-through in most of your markets is sort of better now than a few months ago. Just trying to understand that, please?
Michael Larsen: I’d say it’s about the same, Julian. I mean, I think we – as Chris said, we just delivered 2% organic growth in 2023 in a pretty challenging environment as we talked about. And that included a point of inventory reduction impact. And I might add a point of drag from semi since it came up earlier. So if those two don’t repeat, which is what we’re saying, then you go from 2% to 4% pretty quickly. And we’re not saying that destocking continues at the same level in the first half, which I think is what you said. We do expect it to be less of a drag in the first half. We also said the comps year-over-year are certainly more challenging in the first half than they are in the second half. So I think we’re confident because when we look at everything going on inside the company and this focus on driving above market organic growth, a big focus on customer-back innovation, we look at the pipeline and new products that are being launched in every one of our divisions across the company.
We look at a kind of a normal pricing environment. We feel pretty confident based on what we’re seeing, as we sit here today. Now, we also said this is a pretty uncertain and volatile environment, things can change quickly. And so the thing that we have a lot of confidence is our ability to continue to read and react to whatever conditions our divisions are dealing with on the ground and deliver strong performance as we go through 2024. So we’re not economists. We’re not trying to forecast where the global economy is going. We’re kind of basing our guidance on all the things we just talked about. And that’s how we end up in that 1% to 3% range for 2024, which to us doesn’t seem like a moonshot based on everything we just talked about.
Julian Mitchell: That’s helpful. Thank you. And then maybe switching away from the topline. On the margin front, I think in an earlier question reply, you mentioned sort of higher investments offsetting enterprise initiatives. So there’s a couple of things on margin. One was, are we seeing a big increase in R&D and/or CapEx this year and any color on those as a sort of external benchmark for that reinvestment rate? And then price cost, I think a big first half tailwind for you maybe on margins this year. Just wanted to sort of any sense of scale for that.
Michael Larsen: Yes. Price cost, I think we’re kind of in a normal environment for 2024. It’s not going to be a material driver of our performance. It’ll be a modest contribution to margins and EPS in 2024 based on everything that we know today from a pricing and inflation standpoint. In terms of the investments, I think, our investments grow in line with our sales over time, and that’s true both for customer-back innovation, it’s also true for our capacity CapEx improvements that – that are all of these investments, about $800 million in 2024 are geared and centered around driving above market organic growth in every one of our divisions. And the biggest headwind, I think to margins this year was not so much the investments necessarily not just in growth, but we saw inflation in our employee-related costs just like everybody else including wages and benefits.
And we expect that part of the equation to moderate here in 2024 based on some of the actions we’re taking to manage those costs in 2024. So that’s not going to be an increased headwind as we go forward.
Julian Mitchell: Thanks very much.
Michael Larsen: Sure.
Operator: Your next question comes from the line of Mig Dobre with Baird. Your line is open.
Mircea Dobre: Thank you for taking our question. Good morning.
Christopher O’Herlihy: Good morning, Mig.
Mircea Dobre: On the topic of outgrowth, it sounds like you’re seeing about 2% this year. You’re aiming for maybe 3 percentage points. I guess what I’m curious, when you’re looking at your portfolio, presumably we don’t have this outgrowth notion being sort of evenly distributed, what portions of your portfolio are generating outgrowth at the pace that you need it to be? And where else do we need to see further investment or further adjustments needed to be made?
Christopher O’Herlihy: Yes. So Mig, I would say that, we’re probably seeing our growth across most of our portfolio. I would use, auto as an example, think about flat bills in 2024. We’re talking about 3% to 5% on auto as an example. We’ve historically outgrown in food equipment. As I think, if you look at some of the comparisons and so on. Also with welding and with construction, large down market here in 2023 which we outgrew, so we have the capacity to outgrow across much of our segment. And with respect to investments, I think we’ve been making these focused targeted investments for some time now. This is not new news. This is something we’ve been doing for a few years to really position ourselves to grow at 4% plus across the enterprise over this next phase.
And I think the big driver of that, as we said a few times is customer-back innovation, is leaning on customer-back innovation that we’ve been working on for a couple of years, and we’ll accelerate over this next phase. And that’s really what will drive the outgrowth going forward. And that customer-back innovation opportunity resides in every segment on the basis of the level of differentiation in every segment, the share runway opportunity we have in every segment. So we would expect every segment in time to meaningfully contribute to that 4% plus organic growth.
